JD Vance has fuelled hopes that a UK-US trade deal is imminent after saying the agreement had a 'good chance' of being struck
Hopes of a UK-US trade deal – and Britain’s ability to lessen the hit from Donald Trump’s tariff regime – have risen today after Vice President JD Vance said the agreement stood a “good chance” of being struck.
In an interview with UnHerd, Vance said both sides were “working really hard” and that he believed they could reach a “great agreement” because Trump “really loves” Britain.
In the wake of the US President’s stock market-rattling tariff announcements this month, Vance’s comments will give Downing Street and Whitehall a much-needed boost.
But, as with any dealings with the Trump administration, nothing is certain until everything is agreed.
Here is what the UK stands to gain from a trade deal with the US and what it should fear:
1. Tariff-free trade
The 10 per cent “reciprocal” tariff Trump imposed on the UK on “liberation day” earlier this month could be reduced or wiped out under a bilateral agreement.
While the UK dodged the worst of Trump’s tariffs, as 10 per cent was the baseline rate, this still means higher levies for firms trading with the US than they did previously.
And UK motor manufacturers still face 25 per cent tariffs. The US was the UK’s largest trading partner last year, with total bilateral trade worth £294.1bn to Britain, or 17.2 per cent of the UK’s total trade. A trade deal would cut the cost of those new tariffs as well as open up more opportunities for UK firms.
2. Economic growth
A deal would also boost economic growth on both sides of the Atlantic. Sir Keir Starmer has pinned his hopes of re-election on the UK economy growing by 2029, and so far, growth has been next to flat since Labour were elected last July.
More investment opportunities for UK firms would boost production in key areas like pharmaceuticals, motor manufacturing and tech services.
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3. Motor manufacturing
The UK’s already-challenged motor manufacturing sector received a blow when Trump slapped 25 per cent tariffs on all imports of cars and car parts into the US. This is particularly acute for the UK’s luxury car-makers, which are a big exporter to America. Jaguar Land Rover’s Solihull plant paused all shipments to the US following Trump’s announcement.
A UK-US trade deal would aim to get a beneficial arrangement for the British automotive sector, which is so crucial to the UK economy: cars were the top UK goods exported to the US last year, in trade worth £8.3bn to Britain, or 13.8 per cent of the UK’s total exports of goods to America.
4. Pharmaceuticals
According to the Department for Business and Trade, exports of medicinal and pharmaceutical products to the US were worth £7.2bn last year, or a total of 12 per cent of total exports to America – the second biggest goods export.
The UK’s pharmaceutical industry is a huge target area for economic growth, and under a trade deal with Trump, this sector could flourish even more, with UK-based companies offered more opportunities in the American market.
5. Technology
Successive governments have tried to boost the UK’s tech sector through infrastructure investment.
Promises of Britain having its own thriving AI region to match Silicon Valley have never quite been met, although this sector does show promise.
In January, Rachel Reeves unveiled government funding for infrastructure in the Oxford-Cambridge corridor, which will boost tech and science firms in that region. Technology services will play a huge role in a UK-US trade deal, benefitting the UK’s growing tech and AI sector through greater sharing of expertise and innovation.
But there are downsides…
The fact that a UK-US trade deal has been several years in the making and intensive negotiations with the Trump administration have been going on for weeks without an agreement shows that both sides are driving a hard bargain.
As much as the US President “really loves” the UK, he is not going to let this country walk away without giving something up.
Digital services tax
The technology aspect of the trade deal will bring benefits, as mentioned above, but one huge sticking point is that the Trump administration – of which Elon Musk is a member and is close with other tech giants – wants the UK to drop the digital services tax (DST).
This levy brings in nearly £800m in revenues to the Treasury every year, and the Chancellor said last month it was “hugely important”.
However, US negotiators want the DST to be dropped as part of the deal.
This would mean Reeves would have to find that lost £800m from somewhere, and while it is not a huge amount in overall budget terms, it would be another chip away at the public finances. There are also fears that online safety would be weakened as a result.
Farming and food
Business Secretary Jonathan Reynolds has insisted that British food standards will not be weakened as a result of a UK-US trade deal in an attempt to squash fears that the UK will have to buy chlorinated chicken and hormone-treated beef from America as part of the agreement.
However, earlier this month, the National Farmers Union warned that these standards were still at risk of being undercut due to the deal.
